Trade Tatler
“Buying the right computer and getting it to work properly is no more complicated than building a nuclear reactor from wristwatch parts in a darkened room using only your teeth.”
Dave Barry



THIS ISSUE:     25 Feb - 11 Mar

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Shoprite  There is not absolutely no truth in the rumour...

...that Shoprite is baling from India like the Proteas before them, victim to the devilish slow bowling of protective legislation and price rules which made a single-store operation untenable. This from Sir James himself at last week’s interims presentation, where he also mentioned that trading profit lifted 17.5% to R1.6billion for the six months to December off turnover growth of 11.9% to R33.1biljons, which points to an iron fist when it comes to cost control. He also raised the tricky issue of market share, which Shoprite reportedly grew 1.2% to 29.8% for the period, and to 31.1% for the month of December, its highest level for nine years. Employment was also up for the period, with 5,000 jobs added in the group for a recession-busting total of 89,000, and 44 stores were added, bringing the South African number up to 637.
Comment: Way to go, that Big Red One.

Business Report 01/03/10

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Pick n Pay  The Last Hurrah

Last year, market share, this year, margin. Outgoing PnP Chair Mr Ackerman, who formally retired yesterday, took the opportunity in his final media conference for a sly dig at Shoprite, who recently announced that their trading margin for the six months to December was 5%. "I would not, in today's climate, want to make a trading margin of 5%. I would knock it down," he said. Pick n Pay, which has long built its house on a foundation of avowed consumer championship, showed a trading margin of 2.4% in their last set of results. In his speech, he also advised his successor, a Mr Gareth Ackerman, that business principles never change. He confessed to regrets about the failed Australian adventure but expressed hope for Pick n Pay’s slow-burning Africa campaign.
Comment: A giant, the one true pioneer of the industry in SA, takes his deserved rest, while showing that the old mind is as sharp as ever was.

Fin 10/03/10

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Massmart  Played, chaps!

After its toughest year since listing 10 years ago, Massmart nevertheless reported sales growth of 6.1% to R24billion for the six months to December, although comparable sales were down 0.3% and group operating profit declined by 15%. Makro took a surprising amount of strain for the period, with sales up only 1.5% and trading profit down 10.5%, due substantially to declining food inflation and deflation in general merchandise brought about by the strength of the rand, while the retail/cash & carry division Masscash fared somewhat better with sales up 13.6% and trading profit up 2.6%. Indications are that comparable sales are up by as much as 3.4% for January and February, suggesting that the worst could be over, with bullish noises being made in the upper echelons about a recovery to last year’s levels for the full year. Massmart believe that the great opportunity in a saturated market still lies in the under-served low end.
Comment: A view which those pleasing Masscash results seem to bear out.

Business Day 01/03/10, Bloomberg 25/02/10

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Woolworths  Putting the “success” into succession

The Succession Plan is unfolding neatly over at Woolies, where Mr Susman’s appointed successor, Ian Moir, has put together a structure which leads neatly up to the big handover in November. Zyda Rylands has been moved into the MD: Foods position, while Julian Novak also has a senior but unspecified position in Foods. Paula Disberry is taking over Supply Chain and IT, with Fawza Essa in Retail Operations and Charmain Huet in Marketing. According to Moir, who joins us from sunny Aus where he presided around the turnaround of Country Road, his focus will be operational, as Mr Susman has already done most of the big thinking. The idea is to cut duplication, streamline structures, speed up decision making and measure the performance of the senior team.
Comment: Having weathered the recession and grown its share of the food market, the Classy One seems poised for interesting times.

Financial Mail 26/02/10

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Aspen  The silver bullet

While Aspen’s interim results for the six weeks to December point to the fact that local operations have driven growth, the pharmaceutical giant, as businesses like these are known, has expressed some concern about the government’s lack of consistency in the application of the Single Exit Price (SEP) legislation on revenue in future. While the cost of manufacturing drugs has gone up with inflation, you see, the government hasn’t dished out an SEP increase in over a year. The rand is another challenge – rand strength was a big factor in the reduction of operating profit in sub-Saharan Africa (excluding SA) by more than half to R45million. In total, international profits declined from R554million to R463million for the period, while back home they rocketed from R484million to R806million. Aspen do still see Latin America as the single biggest area of growth for the business, anticipating sales in excess of R1billion annually in the future.
Comment: Aspen is not bulletproof, but who is? A fantastic business on a brilliant trajectory, with challenges to be faced nevertheless.

Business Report 04/03/10, 08/03/10

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SAB  The Beer Ambulance: an idea whose time has come

The Big Feller is anticipating an increase in demand of its amber-bubbled product to the tune of 4-6% over the time of the Big Palaver come June/July. While an unavoidable number of people will be quaffing the thin, watery stuff on official sale at the various stadia, most red-blooded South Africans will continue to enjoy a stronger brew at home in front of the telly or down the local come FIFA time. Accordingly, SAB are ramping up their production for the months of April and May, producing an extra 30 million odd beers, putting refrigerated vans on standby in the match areas and setting up emergency help lines for customers whose establishments are running dry.
Comment: The Normandy landings all over again. But with football fans and beer instead of Jerries and bullets, obviously.

The Times 02/03/10

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Pioneer  Off with their breads!

Watch the workings now. The PSG Group, an unlisted company, owns 41% of Kaap Agri through its subsidiary, Zeder Investments. And Kaap Agri owns 40% of Pioneer. And the entire 14 member board of Pioneer has been asked to resign by PSG, under the firm but fair stewardship of Jannie Mouton, whose beard is legendary for its silvery crispness. PSG are taking the Competition Commission at its word, you see, that a business which has just cost its shareholders (or someone, anyway) R195million could probably stand a bit of scrutiny at the management level. The Commission themselves, by the way, are appealing the R195bar fine and suggesting that something in the order of oh, say R1.5 beeeelion would be more appropriate.
Comment: Heavy. Especially considering the relative wrist slappage that Tiger and Premier got away with for the same bit of skullduggery.

Business Report 05/03/10

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Things generally  Chicken soup for the economy

GDP was up by 3.2% for the fourth quarter of ‘09, the Kagiso Purchasing Managers’ Index (PMI) hit a three-year high of 60.4, indicating a rebound in the manufacturing sector, while the Business Confidence Index rose to 83.0 last month from 81.2 in January, buoyed no doubt by all this other good news. What does it mean? We’re officially out of recession, for starters, with GDP growth up two quarters in a row. And with the return of manufacturing, job losses have come to a standstill. For the punters, food inflation remains a concern, although at 2.4% – still above the developed world – it has definitely been worse. And lest we get too excited, private sector borrowing fell in January for the fourth month in a row, suggesting that our recovery from the recession will be gradual rather than otherwise.
Comment: But a positive set of indicators nevertheless.

Tatler Reporter 10/03/10

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Agriculture  Down on the farm. And we do mean down.

Food security in SA is under threat as 90% of the farmland acquired in the government’s redistribution programme has become unproductive, according to the Minster of Rural Development and Land Affairs. The government will apparently spend R500million this year restoring the farms to viability, beginning with 200 farms identified for recapitalisation and development. Another threat to food security is that fact that foreign nationals of unspecified origin are buying as much as three times the area of white farmland as the government is acquiring for redistribution.
Comment: Happy Joy Luck combine harvester, anyone?

The Times 03/03/10

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SPAR  Jolly, green

SPAR are busy earning all that green in the logo, having sponsored and hosted a wonderful Environmental Summit for kids from all over South Africa and the continent last year, and running an absolute hoot of an ad on Animal Planet showing various fauna refusing plastic bags at the checkout. And all of this with the joie de vivre that distinguishes them in the SA retail environment.

Tatler Reporter 10/03/10

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Marks & Spencer  There’s always Plan B...

And speaking of green, Marks & Sparks have developed a plan – the catchily-named Plan A – to become the world’s most sustainable retailer by 2015. The idea, inter alia, is that absolutely everything sold under the M&S roof will have at least one sustainable quality, and that punters and suppliers alike will be encouraged to be greener. Other goals include traceability and clarity for the living wage debate. 02/03/10

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